Phytopharm, the company trying to develop drugs from plant extracts, suffered a big setback yesterday when Pfizer - the biggest drug company in the world - abandoned work on its much-hyped treatment for obesity.
The news wiped a third off Phytopharm's market value, although the ebullient chief executive, Richard Dixey, argued the drug would still get to market, and the delay could even improve the company's future profitability.
The drug development project, codenamed P57, is based on a Kalahari desert cactus, known as a Hoodia, which has been used for centuries as an appetite suppressant by the San people in southern Africa.
Pfizer had been preparing to launch a final stage of human trials in the autumn, but has been cutting back work on natural medicines in the wake of its $260bn merger with Pharmacia.
Mr Dixey argued that the stock market reaction - sending the shares down 85p to 175p - was ill-judged. "The drug has been returned to us because of a restructuring within Pfizer, not because it has failed, and any reaction of the share price has to be looked at in that light."
Pfizer signed up in 1988 to work on P57 and had been funding much of the development. Its decision to abandon the project and hand back the rights to the product to Phytopharm robs the UK company of the prospect that the world's biggest drug salesforce will be marketing its drug. More immediately, it means a $2m milestone payment will not come in as expected in the autumn.
Mr Dixey said that "seven of the top 10 multinationals" had previously expressed an interest in P57 and he was confident of finding a new partner. "We are now able to open up the doors and we hope to begin that process very shortly. We hope to have concluded that work by the half-year and if we do so this could actually be cash-positive rather than cash-neutral."
He argued that positive results from the human trials conducted by Pfizer to date should allow Phytopharm to get a better deal from a new licensee than it got from Pfizer in 1988.
Shares in Phytopharm are back only to their levels of three months ago, before a Panorama documentary on the San, featuring Mr Dixey, who is a buddhist, reignited stock market interest. The stock has been an erratic performer, peaking as high as 880p in 2001, but tumbling back after one of the company's most-hyped products, a treatment for baldness, turned out to be less effective than E45 moisturising cream. There was also hilarity when its treatment for arthritis in dogs made their coats smell of urine.